Congratulations! You’ve got a job offer! And not only did you get an offer, but the wooing company promises to give you a big fat check on Day 1 to show you how much they care. Yes, the famed Signing Bonus.

It can be pretty intoxicating to get a giant chunk of extra money in a single day. Just as a reward for saying “yes.” But this is not “free money,” and you don’t want to blow it immediately on, well, anything, really (neither an awesome vacation nor a new car buy).

So, how should you handle your signing bonus?

How Signing Bonuses Work

The tech market is hot nowadays, and employers are clamoring for employees. To sweeten the pot for your awesome self, your potential new employer offered a signing bonus to entice you to take their offer, and not the offer from That Loser Company.

Though these bonuses can be paid out in a variety of ways, with my clients I usually see them paid out 100% on Day 1, with the understanding that if you leave the company within a year, you’ll need to repay all or a prorated part of the bonus. For example, if you leave after 6 months, you might have to return all the money, or perhaps half of it.

Signing bonuses are typically taxed like regular ol’ income. It’ll probably have a default 25% tax withheld from it (as most bonuses do), so you’d only receive $15,000 of a $20,000 signing bonus.

The most important thing to understand about most signing bonuses is that:

This money isn’t yours until you’ve satisfied some conditions (performance or time). Until then, it’s just fantasy future money.

Be Sure You Understand the Details

You want to understand the details of your signing bonus so you don’t screw anything up:

How much is the signing bonus?

How will taxes be paid on it?

When will I receive it?

When does it outright belong to me (no chance of having to repay any of it)?

You want to understand this just as thoroughly as you understand the other elements of your job offer:

Ongoing bonuses

Performance review cycle

Performance expectations

Career track

Stock option details

Restricted Stock Units details

401(k) matching

etc.

What You Should Do with the Money

If you’re given a bunch of cash on Day 1 that’s not yours until Day 365, you have now also been given a Tremendous Challenge. Your little lizard brain is going to think that the money is yours, simply because you have control over it.

So, my one overarching piece of advice in this situation is:

Lock up the money and don’t touch it until it is Actually Yours.

If you get the money on Day 1 but it isn’t fully yours for another year, there’s a possibility you will have to pay some of the cash back within the year…which is a textbook definition of a “short-term goal.”

And what do we do with money we’re saving for short-term goals? We save it in a bank account. Nice and safe and easy to get to. In this case, I’d recommend actually creating a separate bank account and naming it “Signing Bonus. Do Not Touch Until <date>.” No really.

At the end of the first year, that money is allll yours and you can do with it what you want (assuming “what you want” is totally adult and responsible and you’d never fritter it away now would you?).

Once the Money Is Actually Yours

Once the money is Actually Yours, I encourage you to use it to leapfrog towards your financial goals. If you’re anything like me, you find it a lot easier to save money when you get it in big chunks, not when you have to save 5% out of every paycheck.

For example, my regular living expenses are covered by my salary, so these big chunks of other cash are not necessary to cover normal expenses. Things like cash gifts (the best!), tax refunds, and bonuses pretty much go 100% into savings (I am a financial planner after all). But even if your rate isn’t 100%, I bet you it can be a lot higher than your usual savings rate!

Of course, this approach is a lot more likely to work if you have a notion of what you’re saving for. “For the future” doesn’t inspire a lot of excitement. So, what are we talking about here? Financial independence? Paying off student loans or other debt? Sabbatical? Buying a home? Changing careers? These chunks of money can leapfrog you towards your goal.

Negotiate Your Signing Bonus

There are at least a couple things you can negotiate around your signing bonus when you’re negotiating about the job offer in general (which you are, right? No matter how good it sounds?):

The Amount

If the employer simply won’t offer you a higher income or more equity, maybe they’d be okay with a higher signing bonus, as it’s only a one-time commitment from them, not a commitment to paying you more indefinitely. The flip side of this, of course, is that it’s only one-time payment for you, too. It can be nice, but it can’t make up for a significantly lower salary over time. Don’t let the dollar signs in your eyes blind you to the longer-term view of the compensation you’ll receive from this company.

The Timing

If you can negotiate the timing of the signing bonus, this can be a handy tax management tool. Say, for example, this year you have a low-income year, but next year (spent entirely at your spiffy new job) you expect to have a higher-income year. Well, it sure would be nice to receive that signing bonus entirely this year, because it might be subject to a lower tax rate. The company doesn’t have to give you any more money, but by negotiating the timing, you can keep more of it.

Speaking of tax planning: if you end up giving any of the signing bonus back, taxes can get a bit complicated. If you receive the bonus in one tax year and pay it back in the next tax year, I highly recommend consulting with an accountant.

If you are starting a new job, be sure to read my free guide all about, well, starting a new job and what financial and career decisions you should be making.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.